Strolling back from lunch one day last November, a government minister surveyed the debris from the previous night’s rioting in Parliament Square and the boarded-up windows of Her Majesty’s Treasury, shattered by students protesting against university funding cuts. “If George has got this right, we’ll win the next election,” the minister said bluntly. “If he’s got it wrong, we’re all doomed.”
George Osborne, Britain’s 39-year-old chancellor of the exchequer, is not just holding the fate of Britain’s coalition government in his hands. His experiment – some would say reckless gamble – with austerity has made him the poster boy of fiscal hawks around the world. If Osborne’s plan to sort out Britain’s yawning deficit in just four years works, it will inspire politicians and economists for years to come.
If it works. Judgment, after all, is not a word that was always attached to Osborne before he became chancellor in Britain’s first postwar coalition government last May. Too young, an economic novice, too political, according to his critics.
Mervyn King, the Bank of England governor, feared before last May’s election that Osborne and David Cameron, now prime minister, “lacked experience” and had a tendency to think about things “only in terms of politics”, according to a US embassy cable revealed by WikiLeaks.
A separate US cable in 2008 reported Conservative party officials as fretting that there was an erroneous public perception that Osborne was “lightweight and inexperienced, in part due to his high-pitched vocal delivery”.
This was the man whose political career was almost over before he reached his forties, after he ill-advisedly ventured on to the polished deck of Oleg Deripaska’s floating gin palace off Corfu; the chancellor strongly denied hoping to solicit an illicit political donation from the Russian oligarch but his reputation was nevertheless battered. At Westminster he was seen to have survived only because of the protection of his best friend, David Cameron. “Those were dark days – it gave him a jolt,” admits a colleague of Osborne. But since then, something remarkable has occurred. The man once seen by Mervyn King and the City as a political ingénue has grown in stature since walking through the door of the Treasury. Around the world, Osborne is cheered by fellow finance ministers as he slashes away at Britain’s vast budget deficit. Only Iceland and Ireland come close to matching his fiscal zeal.
Even some of his political enemies have had to eat their words, including Peter Mandelson, the former Labour minister, who – by unhappy coincidence – bumped into Osborne on that holiday in Corfu. The encounter spawned a wave of stories about who said and did what under the Greek sun. But Mandelson is now ready to bury the hatchet.
“He’s become a more authoritative figure,” he says of Osborne. “Before the election he was seen as rather a tactical and political figure. But he is strong and pronounced in his policy preferences.” Asked whether Osborne might eventually succeed Cameron as Tory leader, the chancellor’s former nemesis pauses and then makes a remarkable observation: “Before the election that would have been discounted – I don’t think it would be discounted now.”
Even today, after 10 months in office, Osborne is still something of an enigma. He gives few in-depth interviews and hardly ever talks about his family. Little is known about his extraordinarily central role to everything the coalition does. His team talk about maintaining “the mystique” of the office, but his low profile has also ensured that Osborne does not become the public face of the £81bn cuts programme.
“He’s playing a long game,” says one Treasury colleague. Osborne knows he is not loved by the public, but if he succeeds he hopes to earn their respect. Conservative observers say he is “like a submarine”, surfacing only to make strategic interventions when he has something important to say, then disappearing for weeks on end.
This month, as he prepared to deliver his “Budget for growth” on March 23, Osborne embarked on a tour of the industrial centres of the East Midlands, but as usual his media team threw a cordon around him, refusing to let journalists hear him speaking to workers at the Toyota factory in Burnaston, Derbyshire. In a short interview he gave after the visit, there was a reminder of why Osborne is determined to keep such a low media profile. “People say you just don’t get it,” said Daisy McAndrew, the ITV News economics editor, suggesting the public could not stomach their local services being closed down by somebody as privileged as Osborne.
Osborne’s problem in these austere times is that he is rich and he looks it. Some have said he resembles a Regency buck; his public caricature is that of the sneering aristocrat, cold and aloof. One minister says he can be “supercilious”; one associate calls him “the most calculating person” they have ever met.
But his acquaintances tell a different story: of a warm, loyal friend with a dark sense of humour best shielded from public view. In private he is good company, a gossip with a boyish giggle and a hinterland that takes in theatre, opera, skiing, pop music and an obsession with US politics. Treasury officials talk of a good boss, on top of his brief, careful to consult senior officials and dutiful in sending out notes of thanks to junior staffers for their work.
While Cameron is perceived publicly as a warmer individual than Osborne, a number of government insiders claim the opposite is true in private. Tony Walker, the bluff deputy managing director of the Toyota site, was expecting to meet the stiff and detached Osborne of popular perception. Instead, he observed with some surprise after his shopfloor encounter with the chancellor: “He’s much warmer face to face.”
Gideon Oliver Osborne was born in 1971, a scion of the old Anglo-Irish aristocracy and the heir of Sir Peter Osborne, 17th baronet, who co-founded the wallpaper designers Osborne & Little. Although the grandest elements of the Conservative party might jokingly sneer that the Osbornes made their money in “trade”, to many people he is simply a classic, aristocratic, born-to-rule Tory.
The eldest of four brothers, he grew up in a large townhouse in London’s Notting Hill, spiritual home of today’s generation of young Conservatives. Osborne does not talk about his brothers, although his younger sibling Adam, a junior doctor, hit the headlines in 2010 when he was reprimanded by a disciplinary panel following allegations of misconduct relating to drugs prescriptions. (Last September Adam Osborne was declared fit to practise by the General Medical Council.)
As a teenager the future chancellor changed his name from Gideon to what he described as the more “straightforward” George, inspired by a war hero grandfather. However, he told his friends at the upmarket St Paul’s private school in west London that he chose George because it sounded more prime ministerial.
Osborne followed the now well-trodden path to power in 21st-century Britain, attending Oxford (where he read modern history and joined the braying upper class Bullingdon Club) and then worked his way through the party ranks as a Tory apparatchik. In 2001 he landed the safe rural seat of Tatton, beloved of Manchester stockbrokers and Premier League footballers.
Along the way he married into a well-connected Tory family, tying the knot with Frances Howell, daughter of a Conservative cabinet minister. Frances went on to write a well-reviewed book about a spirited ancestor, Idina Sackville, a socialite who scandalised London in the 1920s by walking out on her husband and escaping to Africa with a lover. Domestic life at the Osbornes’ Notting Hill home appears more ordered: the chancellor and his wife have two children, Luke and Liberty, but they are seldom photographed as a family in public.
The couple decided to stay in Notting Hill rather than move into the chancellor’s official residence, 11 Downing Street, partly to maintain their privacy, partly because Frances is said to have objected to moving into more cramped quarters. Osborne is an enthusiastic user of Dorneywood, the chancellor’s country residence, where he entertains colleagues and friends and impresses contacts.
His political class was spotted early on. William Hague, the former Tory leader, chose Osborne to rehearse Prime Minister’s Questions with him, with the youthful aide playing Tony Blair. Osborne’s obsession with Blair – “the master” who won three elections – has never left him. He cites Blair’s memoirs, A Journey, as one of his favourite books, a textbook on how to win power – and, ultimately, how to squander it.
There was widespread surprise when Michael Howard, then Tory leader, made the youthful Osborne shadow chancellor of the exchequer in 2005, with the job of taking on the imposing figure of Gordon Brown. Cameron was also offered the job but turned it down, conscious that Brown had seen off six other shadow chancellors in eight years.
When Howard stood down later that year, many expected Osborne to stand for the leadership. He had performed well against Brown, but friends say he concluded that – at the age of just 34 – he was simply too young for the top job.
Instead he offered to head the leadership campaign of David Cameron, a close friend whom he had first met while working as a staffer in the Tory backroom in 1994. Thus began a modernising era for the party, drawing inevitable comparisons between the two young New Labour architects of the 1990s, Tony Blair and Gordon Brown.
Osborne’s friendship with Cameron is genuine – they are godparents to each other’s children – and deep. When Osborne introduced Cameron at the launch of his leadership bid, he called him “Dave”. Nowadays the chancellor is careful to call him “Cameron” or “the prime minister” when talking to outsiders.
Continuing as shadow chancellor under Cameron, Osborne came under fire for his apparent lack of judgment during the financial crisis. “Yachtgate” did not help and Cameron was forced to bring back an old bruiser – former chancellor Kenneth Clarke – to share the workload and to give Osborne some cover.
By the time of the 2010 election Osborne was entrusted with running the campaign, but he remained in the background for most of it. He had access to private polling that showed he was not popular with voters, but his team insist his low profile was due to the fact he was busy running operations. Labour strategists claimed it was an effort to thwart their attempts to portray him as a Bullingdon Club toff, waiting to lay waste to Britain’s public sector.
His arrival at the Treasury last May marked a dramatic reappraisal of Osborne. Sober and poised, he started cutting immediately, promising not to deviate from his Plan A to eliminate Britain’s structural deficit within four years. Mervyn King purred with pleasure, City bankers stopped griping about the jejune man running Tory economic policy.
His stature was bolstered by his new office. Like Gordon Brown when he first became chancellor in 1997, Osborne decided that the best way to achieve credibility was to keep his head down and run the economy effectively, not seek to dominate the daily headlines. He had predicted before the election he would be Britain’s most unpopular man within six months, but Osborne has cannily managed to avoid that fate. Having announced the cuts last year, he retired from the fray and left it to departmental ministers to justify them.
It has been a successful strategy. While only a handful of protesters bothered to turn up to heckle Osborne at his party’s spring conference this month in Cardiff, several thousand gathered to shout abuse at Nick Clegg, the Liberal Democrat leader, at his party’s meeting in Sheffield a week later, claiming he had betrayed them on university tuition fees. When asked why his prophecy about becoming Britain’s public enemy number one has not yet materialised, Osborne jokes with colleagues: “I hadn’t reckoned on Nick Clegg.” While Clegg was burned in effigy in Whitehall at the student protests last year, Osborne has yet to become a public target for eggs or worse.
If he has escaped opprobrium at home, he has been lavished with praise whenever he travels abroad, a point he likes to make in the House of Commons when he lists the international bodies – “the OECD, IMF, G20…” that have endorsed his austerity drive. Even Tim Geithner, US treasury secretary, declared in a BBC interview last month that he was “very impressed” at Osborne’s start in the job, even if he had previously warned of the dangers of administering such rigorous fiscal medicine before the patient had fully recovered.
Although Osborne likes to claim Britain was on “the edge of calamity” when he became chancellor, there is dispute about whether the UK was really about to be swept away like Ireland and Greece by the bond markets. What makes Osborne’s dash to wipe out the deficit fascinating to foreign observers is that it is regarded as a discretionary choice.
By the autumn of 2010, his plan seemed to be working and confidence seemed to be returning to the economy. Treasury officials scoffed when Sir Gus O’Donnell, Britain’s top civil servant, pleaded with them to draw up a Plan B in case things went wrong. By now Osborne was displaying a tendency to hubris, which his critics claim could be a fatal flaw. His pronouncement that Britain was “out of the danger zone” did not look so smart when figures emerged suggesting Britain’s economy had actually shrunk by 0.5 per cent at the end of last year.
When the news came in, Treasury insiders admit that Osborne and his team were in a state of shock. “It was time to put on the tin hats,” said one. A pale-faced chancellor gave a series of interviews in which he blamed snow for the dismal figures. One Treasury insider admitted: “In retrospect we should have underlined rather more than we did that the recovery would be choppy.”
Some economists insist Osborne’s gamble will mire Britain in sluggish growth and high unemployment for years to come. Ed Balls, his Labour opposite number, says his policy is “extreme”. But Osborne’s swagger has returned as the economic data has improved in recent weeks. His self-assurance can sometimes tip over into flippancy, a trait that Osborne himself has identified.
Attending to the economy in the wake of the banking crisis would appear to be a full-time job: what is less known is the extent to which Osborne is involved in all aspects of running the country.
David Cameron has often described himself as “the chairman” of the government, but he has never addressed the question that would be posed by most businesspeople: “Who is the chief executive?” Although the power transmission belt also passes through Oliver Letwin in the Cabinet Office, Osborne is Cameron’s closest lieutenant.
Little noticed, Osborne has shifted the centre of his operations from the Treasury to his official residence at 11 Downing Street, with its interconnecting door to Cameron’s house next door. “The door is permanently pinned open,” says one Osborne ally, noting that relations between Gordon Brown, former Labour prime minister, and his chancellor Alistair Darling, were markedly less cordial.
Osborne starts his day shortly before 8am, travelling in to Downing Street in his official car with Rupert Harrison, his 32-year-old chief of staff, who lives nearby in Notting Hill. On this short commute through the Royal Parks, Osborne and Harrison hold one of the government’s most important meetings of the day at a time when Cameron is still having breakfast with his children “above the shop” in Downing Street.
Treasury officials gather with the chancellor in No 11 for a quick run through media issues and other breaking economic news before Osborne heads down the corridor for Cameron’s 8.30am strategy meeting, attended by his inner circle. He stays in Downing Street for most of the morning.
“Initially, people at the Treasury did find it a bit odd – how much time Osborne was spending with Cameron,” admitted one finance ministry official. But Matthew Hancock, a Tory MP and former adviser to Osborne, asks: “In how many other organisations would it be seen as strange to have the finance function and the strategic function closely aligned?” One Downing Street insider confirmed: “George Osborne is David Cameron’s principal adviser: it’s as simple as that.”
This advice ranges across all areas, not just the economy. On Wednesday, when Cameron is preparing for the weekly bearpit of Prime Minister’s Questions, Osborne spends at least an hour with him, rehearsing jokes and political put-downs to deploy against Ed Miliband, Labour leader. Cameron says these sessions, also attended by Michael Gove, the quick-witted education secretary, are raucous and funny. Gove and Osborne can be so critical of Cameron, the prime minister has been seen to look slightly hurt and to ask: “Do you really think that?”
To allow him maximum access to Cameron, Osborne has turned No 11 into a private office, with Treasury officials “hot-desking” between the finance ministry and Downing Street. In between deciding economic policy, the chancellor can be seen wandering down to the press office in No 10 to discuss how to deal with the latest political fire or into Cameron’s “den” for private talks.
After meetings at the Treasury in the early afternoon, Osborne is back in Downing Street for the daily “four o’clock”; another meeting with Cameron’s inner team. That the chancellor likes to point out that he chairs this meeting when Cameron is away is a sign of Osborne’s unofficial rank in government. Treasury officials might slip in one more meeting with their boss, but from about 5.30pm Osborne has invariably moved into relaxed mode and the No 11 drinks cabinet swings open for visiting “stakeholders”, including newspaper proprietors and senior business figures.
At cabinet meetings, fellow ministers say that Osborne makes the expected interventions on the economy but that he is also the minister “for looking round corners”. One says: “He can see the political fallout from any decision better than anyone. Sometimes his contributions are hard to follow, but if you close your eyes and listen you can see the government’s strategy coming into place.”
Osborne and Gove are seen as the cabinet’s arch foreign policy hawks, a position mocked by one minister who says: “Neither of them have any foreign policy experience beyond what they have read on the internet.” Osborne’s team deny that he is a neo-con, although he is very interested in US politics and tries to stay in touch with the likes of Robert Zoellick, Henry Kissinger and recently Dick Cheney.
Because Osborne and Cameron were joint architects of the “New Tory” project, their views can sometimes appear interchangeable. However, Osborne takes more liberal positions on social issues such as abortion and gay adoption and has less time for some of Cameron’s social initiatives. Above all he is a pragmatist, like his political hero Tony Blair. Like Blair, Osborne did what he thought was needed to get his party elected. It is worth recalling that today’s globally admired fiscal hawk promised in opposition that a Tory government would match Labour’s spending plans – plans the chancellor now considers to be responsible for taking Britain to the “brink of catastrophe”.
Osborne’s friendship with Cameron has so far withstood the strains of office. “I’ve seen Cameron snap at other ministers, but never at Osborne,” says one in the inner Downing Street circle. “They respect each other – they know when to let the other have his little victory.”
Treasury officials agree that Osborne is a “political” chancellor and can see the advantages of having a direct line into the prime minister. But another says: “We wonder what will happen if the relationship with Cameron goes wrong.”
Osborne, a keen student of political history, knows the dangers of chancellors and prime ministers falling out better than most. His critics believe that a rupture with Cameron would be the end of the chancellor. “George doesn’t exist without David,” says one minister. “He doesn’t have a political base in the party: his relationships are upwards, not downwards.”
But Tory insiders say that this is a million miles from the truth and that Osborne has, almost unnoticed, been creating an awesome network of support that could sustain a bid for the leadership when Cameron finally stands down.
New MPs say Osborne is by far the most assiduous cabinet minister when it comes to talking to and reassuring parliamentarians that his strategy is right. “He’s not warm,” says one. “But he listens more than he talks and you feel like you are having a grown-up conversation with him.”
Osborne also goes out of his way to cultivate people he expects to be working with for many years to come, addressing conferences of up-and-coming civil servants and ambassadors. Treasury staff say the chancellor is proud of hand-signing a prodigious number of Christmas cards. How many? “Thousands,” says one insider.
Meanwhile he endlessly cultivates influential Conservative opinion formers, columnists such as Tim Montgomerie (founding editor of the ConservativeHome website), Benedict Brogan (deputy editor of The Daily Telegraph), Matthew D’Ancona (former editor of The Spectator) and James Forsyth (The Spectator’s political editor). “He’s far better at that side of things than Cameron,” says one Tory party member.
A ConservativeHome survey this month suggested all this work may be paying off. In a satisfaction poll conducted among party activists, Osborne came second only to Iain Duncan Smith, and ahead of Cameron.
His well-received speech to the party’s spring conference in Cardiff strayed well beyond economics. Almost prime ministerial in range it gave clear signals to the party base about where he is heading. Noticeably there was no reference to Cameron’s beloved “Big Society” project – a concept seen as far too fluffy by Tory activists – and plenty of vigorous language about Libya.
Indeed it could be said that Osborne has built good relations with just about every group important to his future political success, except one: the electorate. But even if he has hardly been embraced by the public, his first Budget did earn him respect with polls showing he was the most popular Tory chancellor in recent times.
Osborne’s admirers say the chancellor knows that when the time comes, he could face challenges for the Tory leadership from Boris Johnson, the charismatic London mayor, Jeremy Hunt, the culture secretary or others. “He knows he may have to take on a candidate people have never even thought of yet,” says one.
But when will that be? Osborne has said there is no “deal” with Cameron under which the prime minister has promised to stand aside at a certain point to give his friend a shot – in other words no repetition of the infamous “Granita Pact” supposedly sealed between a young Blair and Brown.
But people in the Cameron camp say with certainty that the prime minister will not try to extend his premiership beyond a second term. “He’s seen what happened to Margaret Thatcher and Tony Blair: they both stayed for 10 years and it was too long,” says one Cameron intimate. “David wants George to succeed him and will do what he can, but he knows he cannot deliver it on a plate.”
Osborne’s team refuse to talk about any future leadership ambitions, pointing out that the chancellor chose not to contest the leadership in 2005. Then, in the same breath, one ally says pointedly: “He’s five years younger than David.”
Osborne might publicly deride Gordon Brown, but in certain ways his behaviour echoes that of the former Labour chancellor in his successful early years: the low media profile, the cultivation of the party base, the courting of the commentariat, the drinks with media proprietors. But Osborne’s supporters say there is a crucial difference: if Brown ultimately wanted Blair to fail, the chancellor wants – and needs – Cameron to succeed.
Tim Montgomerie says Osborne is unquestionably a loyal ally to Cameron, not a threat. But, he adds: “The fact is that if Osborne succeeds the government succeeds. Sometime in the next parliament – if, if the Conservatives are re-elected – when there are a few more grey hairs on Osborne’s head, he may well become Cameron’s successor.”
The chancellor has never given up hope of one day seizing the prize that he was apparently eyeing as a teenager at St Paul’s School when he changed his name. If Osborne’s big economic gamble pays off, who knows? But if it fails, it will not be just the Conservative party, the coalition government and the British economy that are doomed.
George Parker is the FT’s political editor. To comment on this article please e-mail email@example.com